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Allegheny Technologies (ATI) Up 10.3% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Allegheny Technologies (ATI - Free Report) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Allegheny Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Allegheny's Q4 Earnings Trail, Revenues Top Estimates
Allegheny logged net income of $41.1 million or 30 cents per share in fourth-quarter 2018, a significant improvement from a profit of $1.7 million or a penny per share in the prior-year quarter. Earnings in the year-ago quarter was hit by debt extinguishment charges of $37 million.
Earnings per share for the reported quarter, however, missed the Zacks Consensus Estimate of 33 cents.
The company reported revenues of $1,037.9 million in the quarter, up 14.1% year over year. Sales surpassed the Zacks Consensus Estimate of $981.4 million.
FY18 Results
For 2018, the company registered a profit of $222.4 million or $1.61 per share, compared with a loss of $91.9 million or 83 cents per share a year ago.
Revenues climbed 15% year over year to $4,046.6 million for the full year. The company witnessed strong demand for forgings and components for the aerospace and defense markets as well as nickel-based and specialty alloy products.
Segment Highlights
Revenues at the HPMC segment went up roughly 15% year over year to $596.1 million driven by strong growth in sales of next-generation jet engine products that jumped more than 50% year over year. The company’s sales to the aerospace and defense markets went up 15% year over year.
Operating profit rose around 16% year over year to $76 million in the reported quarter. The improvement was mainly driven by better product mix of next-generation forgings, components and nickel-based alloys for the aero engine market, partly masked by higher operating costs including major maintenance and increased energy costs across certain facilities.
The FRP segment’s sales rose 13% year over year to $441.8 million. Sales to the aerospace & defense and automotive markets rose 62% and 18% year over year, respectively. This was partly offset by a roughly 5% decline in sales to oil & gas, FRP’s largest end market.
The FRP segment’s operating profit came in at $11.3 million, down around 50% year over year, hurt by price declines in several key raw materials, particularly ferrochrome and nickel.
Financial Position
Allegheny ended 2018 with cash and cash equivalents of $382 million, up nearly three-fold year over year. Long-term debt was essentially flat year over year at $1,535.5 million.
The company generated operating cash flows of $392.8 million in 2018. Cash from operating activities for the fourth quarter was $276 million.
Outlook
Moving ahead, Allegheny expects year-over-year growth in operating margin and revenues at the HPMC division in 2019 through focused growth in highly-differentiated materials and technologies, mainly for the jet engine market. The company targets high-single-digit revenue growth and segment operating profit margin improvement of 150 basis points year over year in 2019 including the unfavorable impact of higher retirement benefit expense of around $8 million.
At the FRP segment, the company expects significant price declines in several key raw materials to hurt its first quarter 2019 results due to the mismatch between input costs and the surcharge index pricing mechanism.
Allegheny envisions results for the FRP segment for full-year 2019 to be in line with 2018. Continued benefits from higher HRPF utilization rates and sales growth of high-value products are forecast to be offset by the short-term raw material costs headwinds and higher retirement benefit expense (of around $23 million) in the segment.
The company also expects strong cash flow generation from operations in 2019. It targets free cash flow of at least $290 million for the year, excluding pension plan contributions.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -35.87% due to these changes.
VGM Scores
At this time, Allegheny Technologies has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Allegheny Technologies has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Allegheny Technologies (ATI) Up 10.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Allegheny Technologies (ATI - Free Report) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Allegheny Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Allegheny's Q4 Earnings Trail, Revenues Top Estimates
Allegheny logged net income of $41.1 million or 30 cents per share in fourth-quarter 2018, a significant improvement from a profit of $1.7 million or a penny per share in the prior-year quarter. Earnings in the year-ago quarter was hit by debt extinguishment charges of $37 million.
Earnings per share for the reported quarter, however, missed the Zacks Consensus Estimate of 33 cents.
The company reported revenues of $1,037.9 million in the quarter, up 14.1% year over year. Sales surpassed the Zacks Consensus Estimate of $981.4 million.
FY18 Results
For 2018, the company registered a profit of $222.4 million or $1.61 per share, compared with a loss of $91.9 million or 83 cents per share a year ago.
Revenues climbed 15% year over year to $4,046.6 million for the full year. The company witnessed strong demand for forgings and components for the aerospace and defense markets as well as nickel-based and specialty alloy products.
Segment Highlights
Revenues at the HPMC segment went up roughly 15% year over year to $596.1 million driven by strong growth in sales of next-generation jet engine products that jumped more than 50% year over year. The company’s sales to the aerospace and defense markets went up 15% year over year.
Operating profit rose around 16% year over year to $76 million in the reported quarter. The improvement was mainly driven by better product mix of next-generation forgings, components and nickel-based alloys for the aero engine market, partly masked by higher operating costs including major maintenance and increased energy costs across certain facilities.
The FRP segment’s sales rose 13% year over year to $441.8 million. Sales to the aerospace & defense and automotive markets rose 62% and 18% year over year, respectively. This was partly offset by a roughly 5% decline in sales to oil & gas, FRP’s largest end market.
The FRP segment’s operating profit came in at $11.3 million, down around 50% year over year, hurt by price declines in several key raw materials, particularly ferrochrome and nickel.
Financial Position
Allegheny ended 2018 with cash and cash equivalents of $382 million, up nearly three-fold year over year. Long-term debt was essentially flat year over year at $1,535.5 million.
The company generated operating cash flows of $392.8 million in 2018. Cash from operating activities for the fourth quarter was $276 million.
Outlook
Moving ahead, Allegheny expects year-over-year growth in operating margin and revenues at the HPMC division in 2019 through focused growth in highly-differentiated materials and technologies, mainly for the jet engine market. The company targets high-single-digit revenue growth and segment operating profit margin improvement of 150 basis points year over year in 2019 including the unfavorable impact of higher retirement benefit expense of around $8 million.
At the FRP segment, the company expects significant price declines in several key raw materials to hurt its first quarter 2019 results due to the mismatch between input costs and the surcharge index pricing mechanism.
Allegheny envisions results for the FRP segment for full-year 2019 to be in line with 2018. Continued benefits from higher HRPF utilization rates and sales growth of high-value products are forecast to be offset by the short-term raw material costs headwinds and higher retirement benefit expense (of around $23 million) in the segment.
The company also expects strong cash flow generation from operations in 2019. It targets free cash flow of at least $290 million for the year, excluding pension plan contributions.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -35.87% due to these changes.
VGM Scores
At this time, Allegheny Technologies has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Allegheny Technologies has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.